How to beat capitalism

Historically socialists have followed the' Marxist' model. By that I mean capture the power of the state and use it to control the means of production. By doing this you can put power into the hands of the people and liberate them from exploitation by the capitalist class. There are basically two ways of doing this: Communism, and democratic socialism. Both have so far failed. Communism, in the Soviet Union, liberated workers and greatly improved the condition of women, but failed to find a successful alternative economic model and degenerated into a dictatorship rather than a 'dictatorship of the proletariat'. Democratic socialism, whereby socialist parties have come to power through elections, has simply failed to control capitalism, again largely because the parties failed to pursue an alternative economic model and were content to 'manage' capitalism through social democracy. I know some people will argue those parties weren't socialist but that's another argument too complex to go into in this post.

There is a pattern here. The key thing is the economy and the creation of money. Having a capitalist economy and a socialist - or social democratic - government doesn't do much for most of the population apart from ameliorating the worst excesses of capitalism. It is certainly preferable to right-wing 'free' market alternatives but it doesn't solve the underlying problem. For a long time, capitalist entities like the big corporations have been more powerful than governments. Many corporations have turnovers which are larger than the GDPs of well-developed nations. Now, through global entities like the World Trade Organisation (WTO) - in which secretive panels of 'experts' are able to overturn national legislation, they have formally elevated commercial interests - the right to make money - above democracy, above all our democratic rights.

What the credit crunch has shown us is the true power of these capitalist entities. The mask has slipped. The 'free' market model has come unstuck through de-regulation, and selfishness and greed - the twin engines of capitalism. We, the poor, the unemployed, the disabled, the low paid, and the working and middle classes, have been forced to bail out capitalism. The losses have been nationalised and the gains are still in the pockets of the people who brought the system down. That is socialism for the rich and the market for the rest of us.

In his book, The Great Transformation, written in 1944, the socialist economic historian Karl Polanyi explained how economies work. He said that they are 'embedded' in society. By this, he meant that they are inseparable from the way we live. They are what we do. This may sound obvious but classical economists, such as Ricardo, have tried to separate the economy from society as if it exists separately in its own right. This is crucial because it allows conventional economists to ignore social and environmental concerns. They just don't figure on the balance sheet. Economists routinely ignore human suffering and environmental degradation caused by capitalism. This helps to give capitalism economic validity because it becomes simply about making money - forget about people and the environment. This is why economists are able to make ludicrous statements like - "It benefits all of us if production is moved to countries where labour costs are lower" - really? Does it? Who does it benefit? Not the people who have lost their jobs and the communities that are devastated. Of course, there have been dissident economists like Marx and E F Schumacher who wrote 'Small is Beautiful - a study of economics as if people mattered'. But Schumacher and Marx have been completely ignored by capitalist academia and media.

Karl Polayni: realised that society and economy are indivisible

Democratic socialists have made a similar error to the economists because they have assumed that politics is also separate from the economy. If you have political power you can change things. But as we have seen that is not true, not unless you change the fundamental basis of the economy. What socialists and progressives need if they are really going to change society is economic power. Capitalism can only be beaten economically. Therefore we need an alternative economic model and we need to start to build that model now. But what is an alternative economy? It is one where the means of production are owned and controlled by the people, and the creation of money is under democratic control.

For the means of production, there are basically two options: Nationalise industries or put them directly into the hands of workers to run and control themselves. Total nationalisation and state control, as in the Soviet Union hasn't worked well because people are not empowered and often they have little incentive to produce anything. They end up still as workers controlled by bosses. The real alternative is economic democracy. This is something that can be achieved through co-operatives. By co-operatives, I mean businesses owned and controlled by the people who work in them. Not possible? Think again. There are already many such successful businesses around. One example is the Unicorn Grocery, a worker-owned co-operative in Chorlton, which is thriving. There are many other examples.

Some cynics will no doubt say that this can only happen on a small scale but I don't believe it. There is nothing to stop larger scale businesses from being run in this way. The co-operatives in Mondragon in Spain provide us with an example of large-scale worker-owned and controlled businesses. Even models like John Lewis and Gore-Tex, which are not wholly worker-owned co-operatives in the sense that the Unicorn Grocery is, offer us a better alternative than voracious capitalists such as Tesco.

The beauty of the co-operative model is that we don't need a revolution or a socialist government to get started. There is nothing to stop people from starting co-operatives now. I have given examples in other posts such as the workers in Argentina who took over factories and started running them as going concerns during the economic crisis there.

In addition to this, we have to put the creation of money, and the control of its supply under democratic control. We need to ensure that only the state, through state-owned banks, rather than private sector banks, can create money. Alongside this, we also need to ensure that there are smaller local and regional banks. We also need a decentralised energy production system where locally owned companies generate energy from renewables and a centrally controlled energy distribution system.

None of this means that we shouldn't bother with socialist or political parties or be trying to get progressive governments elected. Changing our economic model isn't going to happen overnight. We need the support of governments who are friendly and can help with investment. In the shorter term nationalisation of the banks, railways, water, power generators, education, and health is essential for moving us away from a capitalist economy. It's a long haul but this is the only way forward. You cannot beat capitalism politically - it has to be done economically. Socialists and progressives need to start thinking seriously about building a new economy and making it happen - now.